The Rise of Business Ethics by Bernard Mees;

Author:Bernard Mees;
Language: eng
Format: epub
Publisher: Taylor & Francis (CAM)
Published: 2020-03-04T16:00:00+00:00

The Globalisation of Corporate Governance

The development of a new discourse of corporate reform in the United States in the 1970s rapidly led to the dominance of a renewed shareholder-primacy approach to corporate management. As Milton Friedman had argued since the 1960s (Friedman 1962), corporations existed to make money, and the main claimants on that profit had been intended to be shareholders historically, not management elites or workers. The new American economic approach to corporate governance that first arose in the 1970s quickly became principally focused on maximising returns to shareholders, not issues of democratisation (Mees 2015). Much of the discussion of industrial democracy in the Anglo-Saxon countries has subsequently seen the scope of the democratising narrative retreat to an etiolated, management-controlled model of “participation” or “voice” (Bixler 1985; Mitchell 1998; Budd 2004). Industrial democracy in this understanding is restricted to the right of workers’ voices to be heard through their unions—bodies external to the firm—or are reduced to a purely consultative (and often only token) role. Under codetermination, it is the firm itself which is democratised, as shareholder rights to be represented on the board of governance are balanced with those of the right of employees to be heard. The American discourse of corporate governance, however, did not consider democratisation at all, with emphasis on the rights of shareholders (over management) often serving as a proxy for democratisation more generally.

By the 1980s, Nader had despaired of achieving real reform from the perspective of corporate governance (Nader 1984). Yet his focus on consumers lived on. Further reform of American corporate law occurred with the introduction of conservation laws, prohibitions on discrimination in hiring and the further strengthening of legal rights of shareholders, employees and consumers. In 1986 the US Supreme Court confirmed the right of female employees to sue for sexual harassment, and in 1992 federal proxy rules for shareholders were amended in a manner that allowed investors to increase their ability to communicate with each other (Anderson 1987; Schwab and Thomas 1998). But Nader had criticised industrial-democracy initiatives as unworkable in the United States, and codetermination has remained only a peculiarly European aspect of corporate regulation (Nader et al. 1976).

Yet the 1990s saw a great growth in corporate governance reform particularly in terms of what the German scholar Klaus J. Hopt later styled the “code of conduct movement”, a development whose genesis is usually linked to the appearance of the UK’s Cadbury Report in 1992 (Hopt 2007). The Cadbury Report, produced by a committee chaired by former confectionary-industry executive Sir Adrian Cadbury, was not the first such body of its kind, as a similar document had been released by the US Business Roundtable in 1990 and a comparable attempt to provide a national code of conduct (or “compact”) for directors had appeared in the Harvard Business Review in 1991 (Business Roundtable 1990; Working Group on Corporate Governance 1991). The corporate code movement can also be seen to be adumbrated by both the American Law Institute project and the various standards

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